When preparing for a cost reduction project, often times the term “Spend Analysis” gets tossed around, leaving many purchasing professionals to ask what this process actually does for a company. Before jumping to sourcing for new suppliers or vendors, a spend analysis is the process of collecting and consolidating spend as a tool for identifying savings opportunities. A Spend Analysis is the first step to achieving long-term strategic goals and recognizing many unexpected advantages. 

If you need more convincing, here are three strategic reasons your company can benefit from a spend analysis and/or the services of a spend consultant.

Savings, Savings, Savings
First, you may be over spending in the marketplace. The initial step to gaining that clear insight into savings opportunities is understanding where and how your company spends its money. With constant market changes and shifting needs of your organization, a spend analysis is a great opportunity to align your needs with the marketplace and achieve more value for your budget. For example, the IT and Telecom space is constantly evolving with new technologies that can provide significant cost savings for your organization.  A spend analysis may uncover that your organization is wasting money on legacy services that can be upgraded, driving savings and efficiency.

Managing Supplier Relationships
Second, a spend analysis is a prime opportunity to examine your supplier relationship management. It is not uncommon for companies to sign on the dotted line for a product or service and not revisit the supplier relationship until the contract approaches expiration, or worse the contract expires and a new agreement is never put in place. After conducting a spend analysis and really reviewing contracts and POs, your purchasing department gains a refreshed perspective on what your company requires of its suppliers – acting as a catalyst to better engage suppliers and identify areas of opportunity to source additional products and services. Stronger supplier relationships can be a major advantage to not only achieve savings but also expansion into new markets and exposure to supplier innovation, and it all begins with taking a detailed look at your company’s purchasing history and patterns.

Mitigating Risk
Lastly, mitigating risk is one of the most critical activities for any organization. Conducting a spend analysis provides an additional outlet to identify and mitigate supply chain risk. For example, when assessing where your company sources it’s direct and raw materials, you may find you single source from a supplier in a region prone to earthquakes or other natural disasters that could cause major supply chain disruption. Or, less dramatic but just as costly – you find that all the locations and cost centers of your company purchase from the same suppliers but not under a national contract. By assessing your spend and identifying these potential obstacles your organization can create strategies to mitigate the risk, such as diversifying your supply base and leveraging your full buying power.

Gaining a clear view of your company’s purchasing habits is a crucial step in not only reducing costs, but also driving strategic initiatives. For decades, Source One has helped companies achieve billions in savings via comprehensive spend analysis services. Our SpendConsultants are well-versed in not only collecting, cleansing, and classifying spend data, but also identifying strategic opportunities for your organization. Whether your goal is to implement a new technology, reduce costs, or improve category management, our spend consultants can provide the end-to-end support necessary for sustainable results – beginning with a spend analysis. 
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